MedTech’s Tariff Opportunities: Building Supply Chains of the Future
Tariffs are the latest disruption facing MedTech, but will not be the last one. Trade protectionism, extreme weather events, geopolitical tensions and regulatory shifts will continue to come and put companies at risk of growing. Some MedTech companies have begun taking steps to reduce tariffs and meet new trade requirements. But they shouldn't stop there.
The winners at MedTech tomorrow will be those who go beyond trade compliance and strengthen resilient muscles along the supply chain to meet all types of disruption and risks. Specifically, they should focus on three priorities:
• Establish a complete supply chain command center.
• Use AI to improve transparency and map vendor networks.
•Redesign the network in consideration of future shocks.
Trade compliance as the basis
Leading MedTech companies are already investing in building stronger trade compliance capabilities, giving them an advantage in addressing current challenges. They have developed tariff control towers, improve data visibility and put cross-functional processes in place, all of which can help them track and report content and comply with tariffs as their products develop in the value chain. By building the foundation and taking a more holistic approach, companies can prepare for wider disruption and risk.
Where to go next? There are three priorities that companies should focus on.
1. Expand the tariff control tower to a complete supply chain command center. The first priority is to build on the tariff command center and expand it to dedicated supply chain command centers with wider authorization. The purpose of the Center is to identify and proactively mitigate emerging risks of all types – regulation, operation, reputation. To reflect its wider scope, the center should have cross-functional personnel, including compliance, procurement and operations teams, to break decision silos. It should track forward signals such as logistics delays, labor shortages and geopolitical changes, and use program modeling to evaluate its impact on the company’s supply chain and financial performance, and test potential responses (and competitors’ actions). The purpose is to prepare for any type of damage and be prepared for response measures and be prepared for deployment.
2. When possible, improve transparency and map vendor network end-to-end. Many MedTech companies have reasonable visibility for their Tier 1 suppliers, but they should push further upstream to Tier 3 and beyond. The continuous improvement of standards for regional content, labor procurement, and capital origins makes this transparency essential rather than a good choice. Richer and more accurate supply chain data is both a win of compliance and resilience – it can help companies predict risks and support smarter supply chain decisions and actions. To improve, some MedTech players work directly with suppliers and make clear provisions on procurement and performance disclosures in part of supplier qualifications. Others invest in AI-enabled solutions that track ownership, map exposure and hidden dependencies of flags. Artificial intelligence can also synthesize all supply chain information, such as country of origin, bill of materials, sales methods, operational plans, tariff rates, and other core data, into a source of truth to help leaders understand their current situation and the potential impact of specific decisions.
3. Redesign the network, considering future shockssupply chain command centers and stronger trade compliance will help companies with a third priority – decisions about changes in production network structure to improve resilience. Many organizations are considering providing nearly transport to the United States, but others are investing in a wider network with regional production as a victory model for local markets. Companies can also diversify suppliers to increase redundancy. These decisions need to be made as soon as possible to avoid being left behind. However, it is important to think long-term and map supply chain outlooks over the next three to ten years, taking into account the damage caused by extreme weather events, geopolitical factors and evolving technologies.
All in all, the current tariff volatility presents a series of new challenges for MedTech, but the uncertainty remains here. Companies must act immediately to build on the trade compliance capabilities they are building to create a resilient supply chain that is ready for future disruptions. In this way, they can develop from today’s compliance victory to create long-term competitive advantages.
Author's Note: This article is based on the insights of Michele Brocca, Lorenzo Capucci and Sarah Lichtblau as co-authors.
Photo: Mohd Izzuan, Getty Images
Vikram Aggarwalis is a global leader in medical equipment and technology work for the Boston Consulting Group and a core member of the company's healthcare and marketing, sales and pricing practices.
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